Divorce and Your Estate Plan

By: Martin M. Shenkman, CPA, MBA, JD

Divorce and Your Estate Plan
Money Matters Radio – Estate Planning Checklist
Introduction/Overview: Divorce has a major impact on your estate plan. We’ve covered this topic in 2009 and 2010, and now we’ll cover some different aspects of it.
Consider the following items?
When Must You Act: Many people going through a divorce don’t address their estate planning until the divorce is over. After all, then they will know what their obligations or rights are, they reason. Bad reasoning. State law doesn’t do anything until the divorce is final. So, if the stress of the divorce kills you your ex will get everything that your will provides for. So, you really should revise your documents when the certainty of divorce first becomes apparent.
Ex as Beneficiary of your Will: If someone just got divorced and has had it with legal bills, is it important to update their estate planning documents?
Yes. Some state laws may automatically remove your ex-spouse as a beneficiary or fiduciary (executor or trustee) of your estate planning documents, but these laws are rarely sufficient. For example, New York law (EPTL 5-1.4) terminates “revocable disposition” to your ex-spouse’s. So, if your ex was named as a beneficiary in your will, that is a revocable disposition and divorce in New York ends his/her rights.
Ex’s Rights Under an Irrevocable Trust: Lots of people set up irrevocable trusts – trusts that cannot be changed. This is done to achieve better tax and creditor protection. But, if you divorce and your ex is named, what can you do? State law is unlikely to help, and the trust is irrevocable! Don’t give up without a careful investigation. If you set up an irrevocable trust, like a typical insurance trust, divorce won’t remove him/her. However, some irrevocable trusts might have a trust protector that can change the status of a beneficiary. If you have that flexibility, you should have him/her removed since the state law won’t help.
There may be another way to skin the trust cat. Say, for example, you have an irrevocable life insurance trust and cannot remove your ex. Well, if the trust only owns term insurance and that coverage is not mandated under your divorce agreement, then set up a new trust to buy new insurance and name the beneficiaries you want. Let the old trust die off. If you don’t make new gifts and the term policy lapses, that may be as effective as having changed the old trust.
Ex as Executor: What about removing your ex-spouse as an executor or trustee?
Yes. Some state laws may automatically remove your ex-spouse as a fiduciary. This includes an executor or trustee under your will and an agent under your power of attorney. But, if your brother-in-law was named, he won’t be removed, just your ex. So, it's really important to revise all of your documents immediately and not take a chance.
Would you want your ex-mother-in-law to be the agent under your medical power of attorney after you left her son/daughter, the "prince/princess?"

Our Consumer Webcasts and Blogs

Subscribe to our email list to receive information on consumer webcasts and blogs, for practical legal information in simple English, delivered to your inbox. For more professional driven information, please visit Shenkman Law to subscribe.

Email

Ad Space

Law Made Easy Press, LLC • P.O. Box 1130 • Fort Lee, New Jersey 07024

Notice and Disclaimer
This site might constitute attorney advertising under 22 NYCRR 1200. This site is for educational purposes only and no visitor should make any decision or take any action without conferring with an attorney and other appropriate advisers in his or her state. No attorney client relationship is established by your use of this site.